NEW YORK (AP) — Stock prices on the New York Stock Exchange fell Friday amid interest rate concerns, which overshadowed an encouraging start to earnings season for big American companies. .
The S&P 500 lost 8.58 points, or 0.2%, to end at 4,137.64, after giving up early gains. The Dow Jones industrial average fell 143.22 points, or 0.4%, to end at 33,886.47, while the Nasdaq Composite Index fell 42.81 points, or 0.4%, to end at 12,123. 47.
Still, the S&P 500 posted its fourth winning week in five, thanks in part to hopes that the Federal Reserve will soon end its barrage of interest rate hikes as inflation runs out of steam. High rates can slow price rises, but only by slowing the economy, increasing the risk of a recession and putting a drag on investment prices.
Christopher Waller, a member of the Fed’s governing board, dampened those hopes on Friday, saying inflation remains too high and even stronger action may be needed. Waller also said that even after rate hikes are over, they will probably have to stay high for longer than markets anticipate.
Following his comments, traders bet the Fed will raise interest rates at its next meeting in May, rather than taking its first pause in more than a year. Some also believe the central bank could raise rates again in June, according to data from the CME Group.
High-growth stocks tend to be hit hardest by high rates, and stocks of big tech companies weighed heavily on the S&P 500. Microsoft fell 1.3%.
Some sectors of the economy have already started to slow under the weight of higher interest rates, raising fears of a possible recession. According to a report released Friday, American consumers last month cut their spending at retail more than expected, much of it due to falling gasoline prices. Still, the decline in what economists call “core retail sales” was not as severe as had been anticipated.
Another report released Friday noted that US households are bracing for higher inflation, which could make things difficult for the Federal Reserve. According to a preliminary survey by the University of Michigan, consumers expect a 4.6% price increase for next year, compared to 3.6% expected a month earlier.
This could be problematic, as the Fed has long feared that entrenched expectations of high inflation could cause a vicious cycle that keeps inflation high. However, long-term inflation expectations remain stable, standing at 2.9% for the fifth consecutive month, according to the survey.
All of these worries helped push up Treasury yields. The 10-year bond yield rose from 3.45% to 3.51%.
Helping to offset some of the rate concerns was the fact that several of the largest US banks performed very well, reporting earnings for the first quarter of the year that were well above forecasts.
For its part, shares of JPMorgan Chase advanced 7.6% after its profits increased by more than half compared to the previous year.
Citigroup shares rose 4.8% after it also reported better-than-expected revenue. Shares of BlackRock, the world’s largest asset manager, rose 3.1% after its earnings also beat expectations.
Associated Press writers Joe McDonald and Matt Ott contributed to this report.
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